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Recurrent funding

Total government contribution

Of the two broad categories of government funding to schools, recurrent and capital, recurrent funding, which supports the ongoing operating expenses of schools, is by far the most significant.

Although Independent schools depend primarily on private sources for their recurrent income, government funding is a significant and necessary component of the income of virtually all Independent schools in Australia.

For the sector as a whole, about 45 per cent of school income came from government sources in 2016. However, the amount of government funding which individual Independent schools receive varies widely.

In Australia’s federal system of shared responsibilities, the Australian Government has taken the primary role in providing government funding for non-government schools, while state and territory governments are the primary source of support for government schools. Conversely, state and territory governments generally contribute much lower levels of funding to non-government schools, and the Australian Government provides a lower share of the government funding for government schools.

In 2015-16, Australian governments, both Commonwealth and state and territory, spent a total of $55.1 billion on school education. As the table below shows, $42.1 billion of this public investment went to government schools and $13.0 billion went to non-government schools.

 

Recurrent funding for school education, 2015-16 ($ billion)

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

In 2015-16, some 65 per cent of school enrolments were enrolled in government schools, which received 77 per cent of total government expenditure on schooling. In comparison, non-government schools accounted for 35 per cent of enrolments and 23 per cent of total government expenditure. Forty one per cent of non-government sector students are enrolled in Independent schools.

Enrolments and government funding by sector, 2015-16

Source: Productivity Commission ‘Report on Government Service Provision’ 2018 and ABS Schools Australia 2017

On an individual student basis, total government spending in 2015-16 on each student in government schools averaged $17,280, while in non-government schools (both Catholic systemic and Independent schools) this was $10,150 per student. Average government expenditure on students in Independent schools is estimated to be about $8,850 per student, or 51 per cent of the average spending per student in government schools. As the table below shows, Independent school students receive considerably less government funding than their counterparts in government schools.

Average per student government funding by sector, 2015-16

Source: Productivity Commission ‘Report on Government Service Provision’ and Australian Government Department of Education

Most of the costs of schooling in the Independent sector are met from the fees paid by parents. It is estimated that the total saving to government expenditure from students attending non-government schools in 2015-16 – both Catholic systemic and Independent schools – was $9.3 billion, and the saving from Independent schools alone was $4.6 billion. This is based on a calculation of the recurrent amount that would be required from taxpayer funds if all Independent school students attended government schools where they would be fully publicly funded.

General recurrent funding

A new funding model was introduced in 2014 under the Australian Education Act 2013 for Australian Government funding for all schools.  Further modifications to the model were made in 2017. The new arrangements have implications for state and territory government funding.

Under the Schooling Resource Standard (SRS) funding model Australian Government recurrent funding is provided as a base grant with additional loadings aimed at addressing disadvantage. The latter funding is directed towards the support of particular groups of students, such as students with disability, students with low English language proficiency and indigenous students.

Full transition to the SRS funding for all schools is now expected to take place by 2027.

Base funding

The per student base funding component of the  funding model is based on the Schooling Resource Standard (SRS), intended as a measure of the cost of effective and efficient provision of schooling. The SRS is a measure of the resources used by a sample of high achieving schools, identified by their performance in the National Assessment program – Literacy and Numeracy (NAPLAN) and excludes any measure of disadvantage.

Government schools are entitled to receive the full amount of the SRS base funding. The SRS base funding amount for non-government schools is adjusted according to a measure of ‘capacity to contribute’, determined by a measure of the school community’s socio-economic status (SES). Differential measures for capacity to contribute have been introduced for primary and secondary schools. As the table below shows, schools with a higher SES score will receive a lower level of per capita base funding.

‘Capacity to contribute’ settings for non-government schools, 2018

Source: Australian Government Department of Education

Some non-government schools, such as special schools, special assistance schools, majority indigenous student schools and remote ‘sole provider’ schools will also be entitled to receive the full SRS per student amount.

The SRS base amount will be indexed annually from 2018 to 2020 by 3.56% and then indexation moves to a floating measure of 75% Wage Price Index and 25% Consumer Price Index with a floor of 3% from 2021.

Loadings for disadvantage

The funding model, once fully implemented, will include a component of loading to address specific areas of educational disadvantage. These are:

  • Size (to take account of the particular circumstances of small schools, and schools outside metropolitan areas)
  • Location (based on Accessibility/Remote Index of Australia (ARIA))
  • Socio-Educational Disadvantage (this applies to the lowest 50 per cent of students using the Socio-Educational Advantage quartiles which are a component of the Index of Community Socio-Educational Advantage (ICSEA))
  • Students with disability (using the Nationally Consistent Collection of Data on School Students with Disability)
  • English language proficiency (Disadvantaged LBOTE)
  • Indigenous students

While all loadings are to be fully publicly funded, they are subject to transition arrangements.

Funding uncertainties

Many uncertainties and considerable complexity attach to the implementation of the SRS funding model affecting the capacity of individual schools to understand and predict their future government funding levels. Consequently schools are limited in their capacity to undertake necessary financial and educational planning.

Transition Arrangements – Originally the SRS funding model involved a 6 year transition period, from 2014 to 2019 though some schools that were funded well above the SRS would have taken up to 100 years to transition down the correct level of funding . The aspiration was that by 2019, most states and territories were expected to be at 95 per cent of the SRS with the bulk of additional funding to be available to schools in the last two years of the transition. The Coalition Australian Government commitment was to the first four years of funding only, 2014 to 2017.

From 2018 the SRS funding model aims to transition all schools to the same amount of Commonwealth funding for the same students. For government schools, the Commonwealth share has been set at 20 per cent of SRS and for non-government schools, the Commonwealth share has been set at 80 per cent of SRS. Non-government schools currently funded below 80 per cent Commonwealth share will transition up to 80 per cent of SRS over six years (by 2023). Non-government schools which are currently above 80 per cent Commonwealth share will transition down to 80 per cent over ten years (by 2027).

Calculation of SRS entitlement – From 2027 the Commonwealth aims to fund all Independent schools at 80 per cent of the SRS.  In 2018 Independent schools that receive Commonwealth funding of more than 80 per cent of the SRS will transition down to 80 per cent by 2027. Special transition arrangements are in place for those schools that will lose funding between 2017 and 2018 or where the transition down to 80 per cent cause financial stress to the school. Independent schools that receive Commonwealth funding of less than 80 per cent in 2018 will transition up to 80 per cent of SRS by 2023.  New schools will be funded by the Commonwealth at 80 per cent of SRS plus relevant loadings for disadvantage.

State-territory differences – State and territory government funding made up approximately 25 per cent of total government recurrent funding for Independent schools in 2016. While the amount of funding provided by each state and territory government to the non-government school sector varies, the contribution is significant to individual schools, and in many cases is crucial to their financial viability. Under the SRS funding model the Commonwealth will fund Independent schools at 80 per cent of the SRS with the state and territory government funding the remaining 20 per cent following arrangements negotiated between state and territory governments and the Australian Government. Until then most state and territory governments will continue to fund schools according to their own methodologies.

System funding – Under the SRS funding model, non-government school systems, including systems in the Independent sector, have been able to choose to use a student-weighted average SES score to calculate their entitlement to government funding. From 2019 non-government school systems will be funded according to the individual SES score of each school within the system.  This change in the funding of school systems is subject to the outcome of an SES review being conducted in 2018. Systems have retained the system-weighted SES score in 2018 pending the outcome of the SES review.

Review of arrangements – Several elements of the SRS funding arrangements have recently been or are currently under review in 2018. These included a review of the Students with Disability loading (implemented in 2018) and a review of the Socio-Economic Status score methodology by the National Schools Resourcing Board.  These reviews have the potential to affect schools’ funding entitlements and arrangements from 2018 onwards.

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